Overview of Investment Banking in Hong Kong
If you ever want to get into investment banking in Hong Kong, then this is a guide that would help you a lot. You may have many questions about the market, about the interview process, about the eligibility criteria, and about compensation structure.
In this article, we will investigate and give you a detailed overview of all of these factors.
Have a look at the sequence of the article –
- Market Overview
- Investment Banking Services in Hong Kong
- Top Investment Banks in Hong Kong
- Recruitment Process
- Salaries / Compensation
- Exit Opportunities
If you are new to Investment Banking, then do visit this starting point – Investment Banking
Hong Kong is the hub of investment banking in China. That’s why most of the investment bankers come to Hong Kong for building their investment banking careers.
There are two reasons behind that.
First, in recent years, there have been quite a few wealthy people who have started living in Hong Kong and they want to invest their money in the right investment funds.
Second, there’s an overlap between private banking and investment banking in Hong Kong.
As a result, all investment banks try their heart out to win even private banking clients. The main purpose of these investment banks is to create a cluster of super-wealthy people and create an investor-pool to get assisted now and in near future.
There are 3 top industries in Hong Kong that investment banks deal with – natural resources, real estate and construction (which are also called as “infrastructure”), and diversified consumer products.
In near past, IPO deals were given prominence. Because many companies in China were going public and they needed assistance to get things done. But things have been changing for better. And along with IPO deals, investment banks in Hong Kong have been closing M&A deals, and DCM (Debt Capital Market) has been on a rise.
If we look at the process of closing deals in DCM, ECM, or in M&A, there isn’t much difference. But if you talk about due diligence, in Hong Kong it is huge. Due diligence is valued even more than the US and Europe.
For example, if any bank decides to do a deal with a company, first there will be a first round of diligence where the management team, their decision-making process, the recruitment, CEO’s decisions and how they affected the company are thoroughly checked. But that’s not all. There would be a second round of due diligence even if no discrepancies were being found in the first place.
Investment Banking Services in Hong Kong
As you can see that investment banking in Hong Kong has been evolving, we can top down few main services investment banks in Hong Kong offers. Let’s have a look –
Debt Primary Market services:
As Basel III was implemented, banks aren’t able to provide balance sheet funding and more expensive. As a result, debt capital market and securitization have been on a rise. In debt primary market, these services are being offered –
- Legal counsel
- Structuring advice
- Transaction execution
- Financial modeling
- Attract a large pool of investors
- Liaise and negotiate with rating agencies etc.
Equity Capital Markets (ECM) services:
ECM is one of the main services offered by investment banks in Hong Kong. Let’s have a look at the gamut of services they offer under ECM –
- Equity: Under equity, they offer share placements, follow-on offerings, initial public offerings (IPOs), block trades and share buy-back, monetization, rights issues etc.
- Structured Equity: Under structure equities, these investment banks offer hedges, embedded-equity loans, collared loans, buy-backs, forward purchases etc.
- Equity linked securities: Under this, the banks offer exchangeable bonds, convertible preference shares, convertible bonds, mandatory convertible and exchangeable bonds etc.
- Hybrids: Under hybrids, there are two services these banks offer – subordinated debt offering and preference shares.
- Company listings
Project finance services:
The investment banks in Hong Kong offer few services under project finance as well –
- Financial advisory for mezzanine debt, equity for all large projects etc.
- Financial structuring
- Sensitivity analysis
- Risk evaluation and mitigation of risk mitigation strategies
- Multi-tranche funding including multilateral finance and development etc.
Leveraged & acquisition finance services:
Investment banks in Hong Kong take care of their clients by offering them following services under leverages & acquisition finance –
- Acquisition finance
- Leveraged finance
- Leveraged buyout
- Management buyout
- Public to private finance
- Capex finance
- Mezzanine finance
- Bridging finance etc.
Structured trade and commodity finance services:
Under this head, banks offer the following services –
- Pre-export financing
- Documentary credits and collections
- Repo financing structure
- Import and export financing
- Currency hedging products etc.
Real estate finance services:
As mentioned above, investment banks in Hong Kong invest a lot in real estate and provide solutions for infrastructure finance.
Top Investment Banks in Hong Kong
The following is a list of top investment banks in Hong Kong. This list is provided by Global Banking & Finance Review (GBFR) –
- Banco Santander, S.A.
- Bank of China
- Bank of East Asia
- China Construction Bank
- Citic Ka Wa Bank
- Dah Sing Bank
- DBS Bank
- Depfa Investment Bank Limited
- First Metro International Investment Company Limited
- Flemings Investment Bank
- Fortis Bank
- Fubon Bank
- Hang Seng Bank
- ICBC Asia
- Kookmin Bank
- Lank Bank of Taiwan, Co., Ltd.
- Mevas Bank
- Nanyang Commercial Bank
- Public Bank
- Royal Bank of Scotland PLC
- Shanghai Commercial Bank
- Standard Chartered Bank
- Svenska Handelsbanken
- Tai Sang Bank Limited
- Taiwan Cooperative Bank, Ltd.
- Toronto Dominion Bank
- UCO Bank
- United Commercial Bank
- Westpac Banking Corporation
- Wing Lung Bank
- Woori Bank
According to asianbankingandfinance.net, here’s a list of banks in Hong Kong as per the value of total assets –
- Hong Kong and Shanghai Banking Corporation (HSBC) [Value of total assets: $5.6 trillion]
- Bank of China [Value of total assets: $1.68 trillion]
- Hang Seng Bank [Value of total assets: $975 billion]
- Standard Chartered Bank [Value of total assets: $853 billion]
- The Bank of East Asia [Value of total assets: $611 billion]
- Industrial and Commercial Bank of China (ICBC) [Value of total assets: $404 billion]
- DBS Bank [Value of total assets: $279 billion]
- Nanyang Commercial Bank [Value of total assets: $239 billion]
- Wing Hang Bank [Value of total assets: $187 billion]
- CITIC Bank International [Value of total assets: $171 billion]
The recruitment process in Hong Kong is slightly different than other countries because there are few factors that controlled the whole recruitment in investment banking in Hong Kong. Let’s have a glance at these factors –
- Living in Hong Kong is imperative: You may not have heard it yet, but it’s true. If you set your eye for Hong Kong and want to build an investment banking career in Hong Kong, you need to stay in Hong Kong. There are two reasons for that. First, staying here will allow you to learn more about the culture which will help you during interviews. And second, by staying here you would be able to network pretty well and quite intensively. So go pack your bags and find out a place to stay in Hong Kong – it can be a hostel, an Airbnb room, or a shared room with one of your friends.
- Networking is required: If you have ever heard that in Asia, you don’t need to do networking for investment banking in Hong Kong, know that it’s not the right information. Since the interviews here are very unstructured compared to the US or Europe, you need to do networking quite intensively here. Intensive networking means meeting people in person if and when it seems necessary. Only cold calling and cold emailing will not make the cut.
- Internships: These days competition is fierce and no-one is ready to leave an inch. At this time, doing internships in Investment Banking is a must. If you can do couple, you would be better off. So don’t ever think that you will get a full-time opportunity in Hong Kong, even if you don’t have an internship experience in Hong Kong. You must do an internship that is also for at least 6 months to score well in the interview for full-time opportunity. Try for more internship if you have time and opportunity. Your job would be to stand out as a candidate so that your chance of getting an offer is higher.
- Interviews: As mentioned above, interviews for investment banking in Hong Kong here is much more unstructured than interviews in the US or Europe. And the whole interview thing is very random here. You may need to go through 15+ interviews to get an offer or sometimes you can get early offers. The investment banking interview questions would include “fit” questions, “technical” questions, and “personality type” questions. You need to know Mandarin Chinese pretty well because, during the interview, they may ask you a question or two in Mandarin and also may ask you to translate an article or a news-report in Mandarin.
- Ideal Candidate: Ideal candidate is a pass out from a top notch school in the US, the UK or Australia, and a native Chinese who would like to build a career in investment banking in Hong Kong. S/he also needs to know the native language quite well and has to complete a 6-12 month internship before trying out their fate for a full-time opportunity.
If you think that Hong Kong is an Asian country and there’s less opportunity for networking and meeting people, you’re wrong. You can meet people quite randomly if you choose. Because Hong Kong is an international hub of doing businesses all around the world!
From MDs to analysts, people visit the similar places and hang out with each other quite often. So if you are looking for a job change or trying to network for your first full-time job, hanging out in these places may be a good idea.
Working in Hong Kong is like working in the US or in the UK. The work hours are pretty similar, but the pressure of closing deals is lesser. There will be many deals which are in the pipelines; as a result, investment bankers always don’t need to pitch for new deals.
Salaries / Compensation
First, let’s talk about the tax rate. The tax rate is much lesser in Hong Kong than in other western countries; that means you would be able to save a lot more than other countries.
Let’s have a look at the salary structure of investment banking in Hong Kong –
If we look at the above chart, the salary looks quite enticing. At analyst level, you would be able to earn around HK$690,000 per annum on an average and you will also be eligible for at least a bonus of 35% which is excellent. At MD level, your earning will have no bound and you will a huge sum of money, i.e. around HK$3,500,000 per annum plus at least 100% bonus; and this bonus can also sometime reach around 130% plus.
People leave investment banking in Hong Kong only when they get a good opportunity elsewhere. There are few exit opportunities you can consider –
- You can leave your job and can explore the buy side at firms. You can also try out in countries like the US or the UK.
- You can take an internal transfer and go back to your home country if you’re a foreigner in Hong Kong.
- You can leave the investment banking career and start your own business.
Getting a full-time opportunity in investment banking in Hong Kong is never easy. But if you can do it, the compensation and the growth are excellent. So there’s no reason why you shouldn’t try out in Hong Kong if you want to build a lucrative career in investment banking.
This has been a guide to investment banking in Hong Kong, List of top investment banks in Hong Kong and the services that they offer. You may also have a look at these Investment banking services in the below countries –
- China Investment banking
- Investment Banking in Russia
- Singapore Investment Banking
- Australia Investment Banking
- Investment Banking in UK
- Investment Banking in Saudi Arabia
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- Dubai Investment Banking